Former state employee questioned in gambling investigation sentenced in state court

Federal authorities questioned former State House worker Clay Covington in the major gambling corruption investigation that led to three pleas and eight acquittals, but he was never charged in that case.

Clay Covington (left) and his attorney Jim Sturdivant leave the Montgomery County Courthouse in Montgomery on Wednesday, Aug. 14, 2013. Covington was sentenced to 12 months supervised probation for not filing tax returns. During that time he was paid $313,000 by two Alabama gambling establishments in addition to his full-time job with the state. (Amanda Sowards/Montgomery Advertiser)

However, the state attorney general’s office pursued him for not paying income taxes on income he received from two gambling establishments operated by Milton McGregor. A state circuit court judge sentenced him to a year probation and fined him $5,000 on Wednesday for not filing income tax returns and paying state income tax on income he received from his state job and from those establishments.

The office of Attorney General Luther Strange, which pushed for a 60-day sentence for the five misdemeanor charges, accused Covington of not paying his taxes and not filing his tax returns to conceal payments from the Macon County Greyhound Park, also known as VictoryLand, and from the Jefferson County Racing Association.

Covington, according to his attorney, was questioned as part of the federal investigation into McGregor, several state lawmakers, other casino operators and lobbyists. Covington was never charged in the case. While three people pleaded guilty in the federal corruption case, McGregor and seven other defendants were found not guilty during the course of two trials.

Jim Sturdivant, attorney for Covington, said his client was questioned extensively by state and federal authorities about the payments from the casinos. Sturdivant said his client has always maintained he did not perform any work for the money.

“He was never asked to do anything,” Sturdivant said of Covington’s role as “Wiregrass liaison” for the gambling operations.

Sturdivant said Covington was questioned as part of the investigation that led to the federal corruption trial and then, a year or more later, they learned about the criminal investigation from the Alabama Department of Revenue related to Covington’s taxes.

Covington reached an agreement with the Internal Revenue Service to pay the taxes owed to the federal government. Sturdivant said he owed about $19,000.

Covington, a 41-year-old Montgomery resident who worked in the Alabama House of Representatives, pleaded guilty last month to four counts of failure to file tax returns and one count of failure to pay income taxes. He pleaded guilty to not paying his state income taxes for the 2006 tax year and for failing to file tax returns for the 2006 to 2009 tax years. The state agreed to dismiss five other counts as part of his plea deal. All of the counts against Covington were misdemeanors.

Sturdivant said the attorney general’s office prosecuting and sending out press releases for a misdemeanor was “highly unusual.”

Before he pleaded guilty, Covington paid the Alabama Department of Revenue $15,480.87 in unpaid taxes, penalties and interest for 2005 to 2011 on $514,619.50 in income.

Covington, who gave an emotional statement to the judge stating he was sorry for his crimes, declined to comment as he left the courtroom. He said the situation cost him his state job he was asked to resign from, has been embarrassing for his family, and cost him thousands in legal fees.

Deputy Attorney General Michael Duffy said concealing the payments from McGregor was “an obvious factor in (Covington) deciding not to file his tax returns.”

The attorney general’s office, in its written request for the 60-day sentence, argued Covington’s “scheme” was a “willful, deliberate, and conscious decision to not file returns or pay income taxes.”

“This was not a mere oversight; rather, it was a calculated decision to weigh the consequences of filing returns and paying taxes against the risk of having his crimes discovered and being brought to justice,” the state argued in the legal filing. “ … Covington made the conscious decision to break the state’s tax laws and continue to conceal the payments from McGregor not once, not twice, not three times, four times, or even five times, but for six consecutive years.”

The state also pointed out Covington’s decision to break the law was not made “in the heat of the moment” and was not a “crime of passion.”

Covington received monthly checks signed by McGregor from the Macon County Greyhound Park and from the Jefferson County Racing Association, according to the attorney general’s office. Covington received a $1,500 monthly check from each entity for a total of $3,000 a month.

His payments later increased to $5,000 a month, $2,500 from each entity. He received 1099 forms from those entities for the payments, which he received until March 2011, according to Strange’s office.

The former state worker received a total of $313,000 in income from the two gambling operations. He received about $201,000 from his work in the House of Representatives during the same time period. He received a W2 each year for those wages, according to the state’s sentencing recommendation.

The greyhound park and racing association filed the required documents with the state and federal government to report the payments.

Covington had previously filed tax returns, but stopped after he began receiving the monthly payments from those establishments, according to a filing from the state. Sturdivant declined to say why Covington did not pay his taxes.

“We felt all along that a jail sentence in this particular case was inappropriate and was uncalled for given the fact that these were mere misdemeanor charges,” Sturdivant said. “It was merely a charge of not filing a return.” He said there were never any allegations of falsifying documents or of “phony documentation.”

Covington said he is working part-time and seeking full-time employment to replace the state job he lost.

“Mr. Covington is a good man. He’s a family man. He’s got two young kids. He’s got a wife who loves him very much and he looks forward to getting on with his life,” Sturdivant said.

Covington worked in the House Clerk’s office from February 2002 to early April of this year. Covington was employed as a journal clerk who kept record of House activities, handled the status of bills, and managed and maintained the House telephone system. He surrendered to authorities about a week after leaving the House Clerk’s office.

Covington is the son of former state Sen. J. Foy Covington, Jr., who worked to bring dog racing to Macon County in the early 1980s.